Dec. 9 (Bloomberg) -- Haier Electronics Group Co. surged to
the highest in 14 years in Hong Kong trading after Alibaba Group
Holding Ltd. agreed to invest HK$2.82 billion ($364 million) in
the home-appliance maker and its logistics business.

Haier Electronics surged 13 percent to HK$21.05 in Hong
Kong trading, the highest close since July 15, 1999. The stock
has climbed 86 percent this year.

Alibaba, which may be headed toward the biggest initial
public offering since Facebook Inc., seeks to bolster its
delivery services and help create the kind of scale and
efficiency that United Parcel Service Inc. and FedEx Corp. have
in the U.S. Working with Haier Electronics, which makes washing
machines and distributes appliances and furniture, will help
Alibaba benefit from rising consumption in China.

“It’s a natural progression of their online to off-line
business,” Billy Leung, an analyst at RHB Research Institute
Sdn. in Hong Kong, said by phone today. “Most of it is
distribution and logistics network. If you look at what’s been
happening, Alibaba has been working on its distribution network
in China, and it’s an additional service that they’re
providing.”

Distribution Network

Alibaba will pay HK$541 million for a 9.9 percent stake in
Qingdao Haier Logistics Co. and HK$965 million for about 2
percent of white goods maker Haier Electronics, according to a
stock-exchange filing. Alibaba will also subscribe to a HK$1.3
billion bond that can be converted into a 24 percent stake in
the logistics unit, Haier Electronics said in its statement.

The total investment amount was confirmed by Alibaba
spokesman John Spelich in an e-mail.

Alibaba, which says it generates about 70 percent of
package deliveries in China, is bolstering its transport
services as billionaire Chairman Jack Ma targets a distribution
network that can reach virtually any place in the country within
a day.

Rising incomes and urbanization are boosting consumer
demand in China, where the urban population surpassed 710
million last year from about 200 million in 1980, according to
data compiled by Bloomberg.

Haier Electronics is majority owned by Haier Group, China’s
largest appliance maker that last year acquired New Zealand’s
Fisher & Paykel Appliances Holdings Ltd. to expand overseas.
Qingdao Haier Co., another arm of the Haier Group, remained
halted in Shanghai trading.